IMF review talks keep stock investors jittery in Pakistan
KARACHI: Stock investors have been trading cautiously since last week when an International Monetary Fund (IMF) mission arrived in Pakistan to review the country's economic performance under its reforms-oriented, $7 billion loan program, analysts said on Thursday.
Pakistan's stocks turned green on Thursday after losing more than 300 points in the last three sessions, with the benchmark KSE-100 index gaining 0.9 percent to close at 115,094.23 points. The stocks, which have gained about 3 percent since March 3 when the IMF experts landed in the country, have been fluctuating and witnessed four bull-runs and as many bearish sessions.
While the IMF and the government remain tightlipped about what they are discussing behind the closed doors, local media reports claim that the two sides are not on the same page over issues relating to Pakistan's revenue shortfall, debt sustainability, and the resolution of the country's power sector debt. The central bank unexpectedly maintaining the interest rate at 12 percent this week is being seen as another negative for stocks investors.
'The stock market is jittery because of the IMF review along with other factors,' Sana Tawfik, head of research at Karachi-based Arif Habib Ltd., told Arab News.
She said the market was mainly reacting to news reports about the IMF expressing concern over Pakistan's tax shortfall of around Rs600 billion ($2.1 billion) and rejecting the government's plans to resolve the lingering circular debt that was expected to increase to as much as Rs1 trillion by June.
The IMF wants Pakistan to increase its tax-to-GDP ratio, which is the lowest in the region, to 13 percent by taxing incomes from agriculture, real estate and retail sectors. Pakistan, however, fell short of the IMF-backed tax collection target this year.
'There is a concern in the market that this tax shortfall may upset the review,' Tawfik said, adding that the selling pressure and a lack of a proper trigger were other drags on the stock index.
Ahsan Mehanti, chief executive officer at Arif Habib Commodities Ltd., said the issues being discussed with the IMF would have a 'direct impact' on stocks, including energy, cement and even the cost of borrowing that is directly related to economic growth.
'Generally higher interest rates are negative for the stocks and we believe the IMF certainly does play a role in the central bank's decisions,' Mehanti told Arab News.
Pakistan's policymakers avoid squeezing the interest rate much at a time when the IMF is reviewing the release of its first tranche under the $7 billion program.
'The market expects IMF's proposal may be growth negative owing to higher interest rates to check inflation risks, thin LSM (large-scale manufacturing) growth in case of a cut in the PSDP (public sector development program) or refusals of circular debt plans,' the commodity analyst said.
But Amjad Waheed, chief executive officer at the NBP Fund Management Ltd., held a different view and said the recent fluctuation looked more like a case of profit-taking as investors booked handsome profits during the last couple of years, when the stock market rose as much as 84 percent.
'The IMF talks are ongoing stable and as per routine. I haven't heard of any tough conditions that the IMF is going to set,' said Waheed, who manages billions of rupees of investor savings.
'People have earned enough and some people now booking profit is normal. The market corrects a bit because of profit-taking.'
The fund manager said some investors might be selling their stocks as their expectation for a rate cut of as much as 1,500 basis points could not materialize because of Monday's decision by the central bank.
'As an investor I am very conscious at the moment. I am holding on to my stocks. I am holding on to my investments. I am very careful with that,' Isra Ghous Rasool, a 22-year-old stock investor from Karachi, told Arab News in a recent interview.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Asharq Al-Awsat
8 hours ago
- Asharq Al-Awsat
IMF Team Makes First Syria Visit Since 2009
An IMF team visited Syria for the first time since 2009 to take part in efforts to rebuild the economy after years of civil war and the fall of Bashar al-Assad, the lender said Tuesday. The International Monetary Fund's trip to Damascus took place from June 1 to June 5, and its team sought to discuss authorities' priorities and how to help achieve them. Syria's economy and the country are a wreck after 14 years of war under Assad, who was ousted in December. "Syria faces enormous challenges following years of conflict that caused immense human suffering and reduced its economy to a fraction of its former size," said Ron van Rooden, who led the visit. Around six million people have fled the country while another seven million have been displaced internally, he noted. "Output has plummeted, real incomes have fallen sharply, and poverty rates are high," he said, adding that state institutions have also been weakened with much infrastructure destroyed. "There is great urgency to address these challenges and achieve a sustainable economic recovery," van Rooden said in a statement at the end of the mission. Much of Syria's infrastructure has been destroyed by the war, which began with a bloody crackdown on peaceful anti-regime protests. Longtime strongman Assad was ousted in a lightning offensive by opposition factions in December, and Syria's new government has sought to rebuild diplomatic ties, including with international financial institutions. Last month, the IMF said it had held useful discussions with Syria's economic team. The Fund's last comprehensive review of the health of the Syrian economy was done in 2009, before the outbreak of the war in 2011. In April, Saudi Arabia and Qatar announced that they would settle Syria's debt to the World Bank totaling about $15 million. The World Bank suspended operations in Syria when the war began. The settlement of its arrears will allow it to resume accessing the bank's financial support and technical advice.
Arab News
11 hours ago
- Arab News
Pakistan announces $62 billion budget 2025-26, raises defense spending by 20 percent to $9 billion
KARACHI: Pakistan on Tuesday announced its federal budget for fiscal year 2025-26 with a total outlay of Rs7.57 trillion ($62 billion), an overall decrease in spending by 7 percent, but hiked the defense expenditure by 20 percent following a recent military conflict with nuclear-armed neighbor India. Finance minister Muhammad Aurangzeb presented a budget that allocated Rs2.55 trillion ($9 billion) for defense spending in FY26, compared to Rs2.12 trillion in the fiscal year ending this month. 'This budget is being presented at a very important and historic moment when the nation in recent days showed extraordinary unity, determination and strength,' Aurangzeb said, referring to the recent military confrontation with India, in which the militaries of the two nations exchanged drone, missile and artillery attacks, with a combined 70 people killed on both sides. 'With this same national unity and determination, we should turn our focus to our economic strength, growth and welfare,' the finance minister said. 'The spirit with which we protected and strengthened our national sovereignty, we need to ensure our financial security and the welfare of the people with the same unity and strength.' The military clash between India and Pakistan was sparked by an April attack by assailants who targeted Hindu tourists in Indian Kashmir in April, killing 26 men. New Delhi blamed the attack on militants backed by Pakistan, a charge denied by Islamabad. The two sides used fighter jets, missiles, drones and artillery against each other before agreeing to a ceasefire on May 10 after four days of fighting, their worst in nearly three decades. Here are some of the key highlights from the country's 2025-26 budget: GDP/DEFICIT * GDP growth projected to be 4.2 percent * Nominal GDP seen at 129.57 trillion rupees * Fiscal deficit expected to be 3.9 percent of GDP * Targets primary surplus of 2.4 percent of GDP INFLATION * Targets inflation at 7.5 percent EXPENDITURE * Total spending seen at 17.57 trillion rupees * Defense expenditure of 2.55 trillion rupees targeted * Interest payments projected at 8.21 trillion rupees REVENUE * Total gross revenue of 19.28 trillion rupees targeted * Targets total tax revenue of 14.1 trillion rupees * Aiming for net external receipts of 106 billion rupees ($1 = 282.0000 Pakistani rupees) - With inputs from Reuters
Arab News
13 hours ago
- Arab News
Pakistan shares range bound amid uncertainty over budget announcement
ISLAMABAD: The Pakistan Stock Market witnessed a range-bound session today, Tuesday, with the index fluctuating within a narrow band amid uncertainty surrounding the budget announcement. Pakistan will unveil its annual federal budget for the coming fiscal year on Tuesday evening, seeking to kickstart growth while finding resources for an expected hike in defense expenditure following a military conflict with India last month, the worst between the nuclear-armed neighbors in decades. Islamabad will also have to contend with remaining within the discipline of its International Monetary Fund program and the uncertainty from new trade tariffs being imposed by the United States, its biggest export market. 'The index recorded an intraday high of 970 points and a low of 51 points, eventually closing at 122,024 — gaining 383 points or 0.32 percent,' brokerage house Topline Securities said in its daily market review. 'Market participation remained healthy, with total traded volume reaching 591 million shares and a traded value of PKR 21 billion.' Media reports say the government is likely to present a 17.6 trillion rupee ($62.45 billion) budget for the fiscal year beginning July 1, down 6.7 percent from this fiscal year. It has projected a fiscal deficit of 4.8 percent of GDP, against a targeted 5.9 percent deficit in 2024-25, the reports say. Analysts said they expect an increase of around 20 percent in the defense budget, likely offset by cuts in development spending. Pakistan allocated 2.1 trillion Pakistani rupees($7.45 billion) for defense in the outgoing fiscal year, including $2 billion for equipment and other assets. An additional 563 billion rupees ($1.99 billion) was set aside for military pensions, which are not counted within the official defense budget. The government of Pakistani Prime Minister Shehbaz Sharif has projected 4.2 percent economic growth in 2025-26, saying it has steadied the economy, which had looked at risk of defaulting on its debts as recently as 2023. Growth this fiscal year is likely to be 2.7 percent, against an initial target of 3.6 percent set in the budget last year. Pakistan's growth lags far behind the region. In 2024, South Asian countries grew by an average of 5.8 percent and 6.0 percent growth is expected in 2025, according to the Asian Development Bank. With inputs from Reuters
